Eleventh Circuit Stops Plan Confirmation Stampede

Relevance

Debtors routinely modify reorganization plans shortly before a confirmation hearing. These modifications usually are either immaterial or are consensual. In the words of the Eleventh Circuit, modifying the plan "before confirmation is relatively easy: the 'proponent of a plan may modify such plan any time before confirmation.'" Id. at *4, quoting Bankruptcy Code (Code) §1127(a). "Easy modification allows negotiated outcomes to quickly become part of the plan," said the court.

There is an important limit, though, to easy plan modification. Aside from substantive and procedural constraints, discussed below, a creditor or equity holder of a corporate debtor or LLC is entitled to procedural protections if the bankruptcy court finds that the modification "materially and adversely changes the way that claim or interest holder is treated." Id., quoting In re New Power Co., 438 F.3d 1113, 1117-18 (11th Cir. 2006). When the parties appear to have accepted a plan and a confirmation hearing approaches, however, courts and most parties are eager to have the court confirm the plan quickly and move on, ignoring objections from interested parties, dismissing them as noise. That is apparently what happened in America-CV.